Historical Summary of Missouri General Fund Tax Rate and Base Adjustments Tax Rate and Base Adjustments

Missouri Historical Tax Summary

January 2009

APPENDIX A Historical Summary of Missouri General Fund Tax Rate and Base Adjustments Tax Rate and Base Adjustments

Sales and Use Taxes

Prior to the ﬁ rst quarter of 1970, sales and use taxes were remitted on a quarterly basis. Beginning with January 1970 sales tax collections, sales and use taxes were remitted to the state on a monthly basis.

Sales tax payments were accelerated again effective February 1984, with larger payers remitting on a weekly basis.

The Missouri use tax became effective in the third quarter of 1959. The ﬁ rst use tax receipts were received in the fourth quarter of 1959. Data prior to this date have been estimated by the State and Regional Fiscal Studies Unit (SRFSU).

The Missouri sales tax rate was increased from 2 percent to 3 percent effective in the fourth quarter of 1963. The higher tax rate was fi rst refl ected in the fi rst quarter 1964 collections.

The rate was temporarily increased to 3.2 percent effective Oct. 1, 1989. The higher rate expired June 30, 1990.

Residential sales of electricity, water, natural gas and other utilities were exempted from the sales tax base effective Jan. 1, 1980. The estimated ﬁ scal year 1979-80 revenue loss was $20 million. The estimated calendar year 1980 revenue loss was $45 million, with an additional $5 million loss for the 1981 calendar year.

Effective Jan. 1, 1980, one-half of the sales tax on motor vehicles was transferred to the State Highway Fund.

Effective Nov. 1, 1998, sales of food for home consumption were exempted from the General Fund por- tion of the sales tax base. Calendar year 1998 revenue loss was $28.4 million.

Sales and Use Tax Tax Rates Effective Date General Revenue Total January 15, 1934 0.5% 0.5% August 27, 1935 1.0% 1.0% June 8, 1937 2.0% 2.0% October 13, 1963 3.0% 3.0% July 1, 1977 3.0% 3.125%1 January 1, 1983 3.0% 4.125%2 July 1, 1985 3.0% 4.225%3 October 1, 1989 3.2% 4.425% July 1, 1990 3.0% 4.225% 1 0.125% Conservation 2 1.00% Proposition C 3 0.100% Parks & Soil

Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-1 Selected Excise Taxes Cigarettes Effective Date Tax Rate mils per cigarette January 1, 1956 $0.001 May 1, 1961 $0.002 July 15, 1969 $0.0045 August 13, 1982 $0.0065 October 1, 1993 $0.0085

All Other Tobacco Products Effective Date Tax Rate percent October 1, 1993 10%

Gasoline Effective Date Tax Rate per gallon January 1, 1925 $0.02 August 15, 1951 $0.03 March 6, 1962 $0.05 August 13, 1972 $0.07 June 1, 1987 $0.11 April 1, 1992 $0.13 April 1, 1994 $0.15 April 1, 1996 $0.17

Special Fuels Effective Date Tax Rate per gallon August 1, 1952 $0.03 March 6, 1962 $0.05 August 13, 1972 $0.07 June 1, 1987 $0.11 April 1, 1992 $0.13 April 1, 1994 $0.15 April 1, 1996 $0.17

Alcohol Tax Rates Effective Date Liquor Beer Wine per gallon per barrel1 per gallon December 28, 1933 $0.80 $1.00 $0.202 - $0.403 May 9, 1935 $0.80 $0.62 $0.024 - $0.105 October 13, 1961 $1.20 $0.93 $0.15 January 1, 1971 $2.00 $1.92 $0.306 August 28, 2002 $2.00 $1.92 $0.42

1 One barrel equals 32 gallons. 2 Light Wine - not to exceed 12% alcohol 3 Fortiﬁ ed Wine - 12% and over 4 Light Wine - not to exceed 14% alcohol 5 Fortiﬁ ed Wine - 14% and over 6 Additional tax rate changes, 8/28/1983 - 8/27/1989 was $0.34, 8/28/1989 - 8/27/2002 was $0.36.

Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-2 Income Taxes Individual Income Taxes

Prior to the fourth quarter of 1961, withholding and quarterly declarations were not required. The fi rst withholding receipts were collected in the fourth quarter of 1961, and the fi rst quarterly declarations were received in the fi rst quarter of 1962. Detailed income tax payments, both individual and corporate, prior to 1967 were estimated by SRFSU.

Prior to the ﬁ rst quarter of 1973, withholding collections were remitted to the state on a quarterly basis. Beginning with the ﬁ rst quarter of 1973, withholding was remitted on a monthly basis.

Withholding payments for large withholders were accelerated to a weekly basis effective November 1982.

For the period 1950-1984, Missouri has had only the following two income tax rate schedules.

The next major change in the base of the individual income tax occurred effective Jan. 1, 1973. In essence, the Missouri income tax law was made compatible with the federal base, with such items as sick-pay and moving expenses being excluded from adjusted gross income.

Prior to 1989, all qualiﬁ ed state pensions were exempt from the individual income tax. Effective July 1, 1989, federal civil service and military pensions were also exempted and all pension income de duc tions were limited. In 1991, University of Missouri pensions were exempted, and in 1998, a ﬁ ve-year private pension phase-in began.

Effective Jan. 1, 1994, the individual federal income tax deduction was capped at $5,000 on a single taxpayer's return and $10,000 on a combined return. Individual Income Tax

Effective Date Tax Rate July 1, 1917 0.5% May 26, 1919 1.5% August 21, 1921 1.0%

Taxable Income Marginal Tax Rate January 1, 1931 0 - 1,000 1.0% 1,000 - 2,000 1.5% 2,000 - 3,000 2.0% 3,000 - 5,000 2.5% 5,000 - 7,000 3.0% 7,000 - 9,000 3.5% 9,000 or more 4.0%

January 1, 1971 0 - 1,000 1.5% 1,000 - 2,000 2.0% 2,000 - 3,000 2.5% 3,000 - 4,000 3.0% 4,000 - 5,000 3.5% 5,000 - 6,000 4.0% 6,000 - 7,000 4.5% 7,000 - 8,000 5.0% 8,000 - 9,000 5.5% 9,000 or more 6.0%

Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-3 Standard Deduction Amounts Single Head of Married Year Return Household Filing Joint FilingSeparate

1989 $3,100 $4,550 $5,200 $2,600 1990 $3,250 $4,750 $5,450 $2,725 1991 $3,400 $5,000 $5,700 $2,850 1992 $3,600 $5,250 $6,000 $3,000 1993 $3,700 $5,450 $6,200 $3,100 1994 $3,800 $5,600 $6,350 $3,175 1995 $3,900 $5,750 $6,550 $3,275 1996 $4,000 $5,900 $6,700 $3,350 1997 $4,150 $6,050 $6,900 $3,450 1998 $4,250 $6,250 $7,100 $3,550 1999 $4,300 $6,350 $7,200 $3,600 2000 $4,400 $6,450 $7,350 $3,675 2001 $4,550 $6,650 $7,600 $3,800 2002 $4,700 $6,900 $7,850 $3,925 2003 $4,750 $7,000 $7,950 $3,975 2004 $4,850 $7,150 $9,700 $4,850 2005 $5,000 $7,300 $10,000 $5,000 2006 $5,150 $7,550 $10,300 $5,150 2007 $5,350 $7,850 $10,700 $5,350 2008 $5,450 $8,000 $10,900 $5,450

Income Limitations for the Senior Citizen’s Property Tax Credit Maximum Income Minimum Maximum Year Single Combined Income1 Credit 1983 $10,000 $10,500 $3,000 $500 1984 $11,000 $11,500 $3,400 $500 1985 $11,500 $12,000 $3,700 $750 1986 $12,000 $12,500 $3,900 $750 1987 $12,500 $13,000 $4,100 $750 1988 $13,000 $13,500 $4,300 $750 1989 $13,500 $15,500 $5,000 $750 1990 $14,000 $16,000 $5,300 $750 1991 $14,500 $16,500 $5,500 $750 1992 $15,000 $17,000 $5,900 $750 1993 $15,000 $17,000 $5,900 $750 1994 $15,000 $17,000 $5,900 $750 1995 $15,000 $17,000 $5,900 $750 1996 $15,000 $17,000 $5,900 $750 1997 $15,000 $17,000 $5,900 $750 1998 $25,000 $27,000 $13,000 $750 1999 $25,000 $27,000 $13,000 $750 2000 $25,000 $27,000 $13,000 $750 2001 $25,000 $27,000 $13,000 $750 2002 $25,000 $27,000 $13,000 $750 2003 $25,000 $27,000 $13,000 $750 2004 $25,000 $27,000 $13,000 $750 2005 $25,000 $27,000 $13,000 $750 2006 $25,000 $27,000 $13,000 $750 2007 $25,000 $27,000 $13,000 $750 20082 $27,500/$30,000 $29,500/$34,000 $14,300 $750/$1,100

1Individuals with this amount or lower received the full amount of tax/rent paid not to exceed the maximum credit for that year. 2In 2008, new legislation gave an additional increase to applicants who were non-renting and owned and occupied their home the entire year

Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-4 Corporation Income Taxes

As with the individual income tax, quarterly declarations were not required until 1970. The ﬁ rst corporate declarations were received in the second quarter of 1970.

The tax rate on Missouri corporate taxable income was raised from 2 percent to 5 percent effective Jan. 1, 1971. The percentage of annual tax liability to be paid on quarterly declarations was increased from 70 percent to 80 percent effective Jan. 1, 1973, and from 80 percent to 90 percent effective January 1984. Also, effective Jan. 1, 1984, large corporations were required to make declarations on the basis of their prior year tax liability instead of their estimated proﬁ ts.

Effective Jan. 1, 1990, a new temporary corporate tax rate schedule was adopted for a two-year period. Beginning Sept. 1, 1998, the tax rate was increased from 5 percent to 6.25 percent.

Effective Sept. 1, 1993, the corporate federal income tax deduction was capped at 50 percent.

Corporation Income Tax

Effective Date Tax Rate July 1, 1917 0.5% May 26, 1919 1.5% August 21, 1921 1.0% January 1, 1931 2.0% January 1, 1971 5.0%

Taxable Income Marginal Tax Rate January 1, 1990 0 - 100,000 5.0% 100,000 - 335,000 6.0% 335,000 or more 6.5%

January 1, 1992 5.0%

September 1, 1993 6.25%

County Foreign Insurance Tax

Prior to July 1, 1965, one-half of the county foreign insurance tax was apportioned to counties for free textbooks in public schools.

A special transfer was made to the county foreign insurance tax during the 1979-80 ﬁ scal year of $7 mil lion. The estimated 1980 calendar year new revenues from this transfer were also $7 million. Quarterly estimates were initiated effective January 1983.

County Foreign Insurance Tax Effective Date Tax Rate March 20, 1895 2%

Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-5 Corporation Franchise Tax

Corporation franchise tax payments were accelerated effective the second quarter of 1970.

Corporation franchise tax payments were again accelerated effective the third quarter of 1980. The estimated new revenues from this change in the collection pattern were $4 million for both the 1980 calendar year and the 1980-81 ﬁ scal year.

Corporation Franchise Tax Effective Date Tax Rate June 18, 1917 0.7500% August 7, 1919 0.1000% November 2, 1921 0.0500% January 1, 2000 0.0333%

Inheritance Tax

Inheritance tax payments were accelerated in the last half of the 1971 calendar year as a result of an acceleration of the Federal Estate Tax.

The inheritance tax was repealed effective Jan. 1, 1981. Collections after this date reﬂ ect both estate settlements for previous years and the newly enacted State Estate Tax. Unlike the Inheritance Tax, it is assessed on the estate itself as opposed t the beneﬁ ciaries Inheritance Tax Effective June 18, 1917 - December 31, 1979 Marginal Tax Rate Value of Property Relationship Type 1 2 3 4 5 $100 - $20,000 1% 3% 3% 4% 5% $20,000 - $40,000 2% 6% 6% 8% 10% $40,000 - $80,000 3% 9% 9% 12% 15% $80,000 - $200,000 4% 12% 12% 16% 20% $200,000 - $400,000 5% 15% 15% 20% 25% $400,000 and over 6% 18% 18% 24% 30%

Relationship Type 1 - Husband, wife, children 2 - Brother, sister, nephew, niece, son-in-law, daughter-in-law 3 - Aunt, uncle, ﬁ rst cousins 4 - Other family 5 - Non-family

The current Missouri estate tax became ef fec tive January 1, 1981, as a replacement for the in her i- t ance tax for individuals who died after that date. Like the old inheritance tax, it is a levy against the taxable estate of the de ce dent. Unlike the in her it ance tax, however, it is as sessed on the estate itself as opposed to the beneﬁ ciaries.

Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-6 The tax base for the Missouri tax is derived from the Federal Estate Tax Return. The base for the Missouri estate tax is the federal credit for state death taxes in the der i va tion of the federal tax. The Mis- souri tax is this amount less any in her it ance or estate taxes paid to other states. Other than the size of the taxable estate and federal tax rates, the two factors that bear directly on the Missouri estate tax are the amount of the Unifi ed Credit (or equivalent exemption amount) and the Credit for State Death Taxes. The size of the Federal Unifi ed Credit de ter mines the fl oor for the Missouri tax since all estates less than this amount are exempt. This credit is presented in Figure 1 for years since the enactment of the current Missouri statute. For taxable estates, those greater than the Unifi ed Credit, the Missouri estate tax is simply calcu- lated as shown in Figure 3. Pursuant to federal estate tax changes, the Credit for State Death Taxes will be reduced by 25% beginning in 2002. This implies that the estate tax receipts will decline to zero in fi scal year 2006. The Federal tax law completely reverts in 2011 to what it was prior to the enactment of the Estate Tax repeal, unless changes are made to the law before then.

Figure 1 Derivation of Federal Estate Tax

Gross Estate Value of all real and personal properties, fi nancial assets and life in sur ance less Funeral and administration expenses Allowable Deductions Debt Mortgages and liens Bequest to surviving spouse equals Charitable and public bequests Taxable Estate plus Adjusted Taxable Gifts equals Taxable Estate/Gift Base Multiplied by effective tax rate equals Tentative Tax plus Maximum of $552,000 Additional Tax on Estates Over $10,000,000 equals Total Tentative Tax less Allowable Unifi ed Credit less Credit for State Death Taxes less Other Credits equals Net Estate Tax Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-7 Federal Unifi ed Rate Schedule Column A Column B Column C Column D Taxable Amount Taxable Amount Tax on Amount Rate of Tax on Excess Over Not Over in Column A Over Amount in Column A 0 $10,000 0 18% $10,000 $20,000 $1,800 20% $20,000 $40,000 $3,800 22% $40,000 $60,000 $8,200 24% $60,000 $80,000 $13,000 26% $80,000 $100,000 $18,200 28% $100,000 $150,000 $23,800 30% $150,000 $250,000 $38,800 32% $250,000 $500,000 $70,800 34% $500,000 $750,000 $155,800 37% $750,000 $1,000,000 $248,300 39% $1,000,000 $1,250,000 $345,800 41% $1,250,000 $1,500,000 $448,300 43% $1,500,000 $2,000,000 $555,800 45% $2,000,000 $2,500,000 $780,800 49% $2,500,000 $3,000,000 $1,025,800 53% $3,000,000 $10,000,000 $1,290,800 55%

Federal Uniﬁ ed Credit

Year of Death Uniﬁ ed Credit Effective Exemption 1985 $400,000 1986 $500,000 1987 - 1997 $600,000 1998 $625,000 1999 $650,000 2000 - 2001 $675,000 2002 - 2003 $1,000,000 2004 $1,500,000 2005 $1,500,000 2006 $2,000,000 2007 $2,000,000 2008 $2,000,000 2009 $3,500,000 2010 - Tax is Repealed 0 (taxes fully repealed) 2011 $1,000,000 (old rules restored)

Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-8 Figure 2 Maximum Credit for State Death Taxes 1 Credit Rate of Credit on Adjusted Taxable Estate on Amount Excess Over Amount Equal to but Less Than in Column (1) in Column (1) 0 - $40,000 0 None $40,000 - $90,000 0 0.8% $90,000 - $140,000 $400 1.6% $140,000 - $240,000 $1,200 2.4% $240,000 - $440,000 $3,600 3.2% $440,000 - $640,000 $10,000 4.0% $640,000 - $840,000 $18,000 4.8% $840,000 - $1,040,000 $27,600 5.6% $1,040,000 - $1,540,000 $38,800 6.4% $1,540,000 - $2,040,000 $70,800 7.2% $2,040,000 - $2,540,000 $106,800 8.0% $2,540,000 - $3,040,000 $146,800 8.8% $3,040,000 - $3,540,000 $190,800 9.6% $3,540,000 - $4,040,000 $238,800 10.4% $4,040,000 - $5,040,000 $290,800 11.2% $5,040,000 - $6,040,000 $402,800 12.0% $6,040,000 - $7,040,000 $522,800 12.8% $7,040,000 - $8,040,000 $650,800 13.6% $8,040,000 - $9,040,000 $786,800 14.4% $9,040,000 - $10,040,000 $930,800 15.2% $10,040,000 - Over $1,082,800 16.0%

1 Based on Federal adjusted taxable estate which is the Federal taxable estate reduced by $60,000. The maximum credit for state death taxes has been reduced to 75% of the previously allowed amount for decedents dying in 2002. The maximum credit for state death taxes has been reduced to 50% of the previously allowed amount for decedents dying in 2003. The maximum credit for state death taxes has been reduced to 25% of the previously allowed amount for decedents dying in 2004.

Figure 3 Derivation of Missouri Estate Tax

Prior to 2005 2005 and later

Federal Credit No Estate Tax for State Death Taxes less Other State Estate Taxes equals Missouri Estate Tax

Prepared by: State and Regional Fiscal Studies Unit, Research Center, University of Missouri-Columbia A-9